Posts Tagged ‘arbitration clauses’

A recent series in the New York Times chronicled the increasingly common practice of including arbitration agreements in all sorts of consumer contracts. The series noted that such provisions are often buried in the fine print of everything from job applications to car rentals to nursing home admission agreements.

Why is this important? Because limiting consumers to arbitration proceedings to resolve disputes means they are likely to recover less, they will have a harder time hiring a lawyer, and they will be unable to sue at all for the kind of small-claim injuries that frequently arise. The very prevalence of arbitration agreements shows just how valuable they are to employers, car rental agencies, nursing homes and other businesses.

One arbitration issue that comes up frequently for the elderly (and their family members and loved ones) is in the care received in nursing homes or other long-term care facilities. Very nearly every nursing home admission agreement we have seen in recent years has included a provision mandating that all disputes must be submitted to arbitration — though the provision is usually buried deep in the admission agreement’s fine print.

Nursing home patients have one advantage not available to most other consumers, however — the nursing home admission agreement usually permits the applicant to decline the arbitration provision. Sometimes that is mandated by state law, and the federal government has indicated an interest in prohibiting mandatory arbitration provisions nationwide. For the moment, though, nursing home patients can usually simply cross out the provision on admission, and breathe more easily because the nursing home can be held to task for any failures in care or management.

When the mandatory arbitration provision is signed, though, the patient and family may not be able to file lawsuits for any later breach by the nursing home. That is not always the case, however, as shown in a new Arizona Court of Appeals decision issued last week.

Arthur Edwards (not his real name) admitted his mother Marta to the Hacienda Nursing and Rehabilitation Center in Sierra Vista, Arizona, in 2010. He later explained that her admission came after he found that he was unable to care for her in his home, and Adult Protective Services let him know that if he did not place her they would initiate proceedings.

By the time Marta arrived at Hacienda, her dementia was already advanced — she could not sign the admission agreement herself. Though Arthur did not have a power of attorney signed by his mother, and was just one of her several children, he signed the admission agreements for her. He also signed a provision agreeing to submit any dispute to arbitration.

Marta died at Hacienda a year later. Arthur believed that her death was hastened by the care she received at Hacienda, and a year after her death he filed a lawsuit on behalf of her estate. Hacienda responded by asking the judge to dismiss the lawsuit and tell Arthur he had to submit the case to arbitration instead.

The trial judge agreed, and dismissed the lawsuit. Arthur appealed, arguing that he didn’t actually have any legal authority to consent to arbitration on his mother’s behalf. Hacienda argued that he was acting on her behalf, that in fact he had authority to act even if he didn’t have a signed power of attorney, and that he had acted on her behalf in other matters, as well.

The Arizona Court of Appeals reversed the dismissal of the lawsuit, and sent it back to the lower court for a trial on the merits. The appellate judges distinguished the facts in Marta’s case from an earlier Arizona case, in which a wife signed her husband into the nursing home (and agreed to a mandatory arbitration provision). Arthur’s legal relationship to his mother was not as clear as the one between spouses, ruled the court. There was insufficient evidence that any of Arthur’s custom of taking care of his mother’s finances and care arrangements amounted to authority to waive her right to have her claims tried in a court. Escareno v. Kindred Nursing, January 29, 2016.

What does Marta’s case mean for consumers in Arizona? First, and most importantly: do not sign a nursing home admission agreement without looking for and crossing out the arbitration provision. Be on the lookout for arbitration provisions on readmission after hospitalization, or in moves between facilities.

Paradoxically, Arthur prevailed partly because he had not done what he should have. He really needed to get some legal authority over his mother’s affairs — whether by a power of attorney or by court proceedings seeking appointment as her guardian and/or conservator. Instead, he basically filled out his mother’s checks and had her sign them until she was unable to, then managed to get her to consent to putting his name on her bank account. If he had gotten a durable power of attorney signed, he would probably have lost his argument that he had no authority to sign the arbitration provision on her behalf.

Is there any other way to avoid mandatory arbitration provisions? Perhaps. The Court of Appeals in Marta’s case was asked to rule that arbitration provisions amount to a “contract of adhesion” — a legal term meaning that consumers are not presented with any real choices and therefore should not be bound by the agreements. The appellate judges took pains to note that that argument might still be available, but that it was unnecessary to reach it in Marta’s case because of the way in which the agreement was signed.

Please note: we are explaining some of the practice and significance of the mandatory arbitration provisions commonly found in admission documents for nursing homes, care homes and other facilities. We have not touched on another pervasive and objectionable practice: asking family members to sign guaranteeing payment of future care costs. There are other problematic provisions in such contracts, and we urge you to seek legal counsel before signing any admission agreement.

If you have recently signed a family member (or a friend, or yourself) into a nursing home or other care facility, you probably have been presented with an agreement to submit all disputes to arbitration. Such provisions are very popular among the facilities themselves, though most individuals who sign them may not understand or appreciate what they are agreeing to. A recent Arizona appellate decision calls the scope of those provisions into question.

Martha Anderson (not her real name) was admitted to a Phoenix-area nursing home four different times in 2011, as her condition worsened and improved several times. After each of the first two admissions, her daughter Mary signed documents on Martha’s behalf. The documents included an agreement, on behalf of her mother, to submit any disputes that might arise between Martha and the nursing home to the arbitration process. For the third and fourth admissions, no one asked her to sign the arbitration agreements again.

Martha’s condition worsened, and she died in the nursing home in 2012. Mary initiated a probate proceeding and then sued the nursing facility, alleging both that the facility’s care led to her mother’s death and that the care amounted to abuse or neglect of a vulnerable adult. The nursing home moved to dismiss the lawsuits, pointing out that Mary had agreed to arbitration instead of a court trial.

The judge hearing Mary’s lawsuit agreed, and dismissed her case. That meant that Mary would have to submit to binding arbitration. Instead, she appealed the dismissal.

The Arizona Court of Appeals agreed with Mary, at least in part. The appellate court determined that the arbitration agreement was not enforceable as to either of the primary portions of Mary’s lawsuit. First, the judges noted that Mary signed the agreement on her mother’s behalf, not her own — and the wrongful death claim she had brought against the nursing home belonged not to her mother (or her mother’s estate) but to the surviving family members. If Martha had signed the agreement, she could not force her children to submit their claims to arbitration, and so Mary could not bind them when signing on her mother’s behalf.

In the particular facts of Martha’s nursing home admissions, the appellate judges also declined to apply the arbitration agreement to the remaining abuse/neglect claims. Because no new arbitration agreement was signed for the third and fourth admissions, Mary had not agreed to arbitrate her mother’s claims arising during those stays.

Mary had also argued that the arbitration agreements were unenforceable because they were simply unconscionable. The appellate judges rejected that argument, finding that she had not shown that the method of securing her signature, or the cost of arbitration would be an undue burden on her. Of particular importance in this finding: both of the agreements that Mary signed clearly indicated that they were voluntary, that her signature was optional, and that her mother’s admission and care would not be affected if she did not sign the agreements. Estate of Aspeitia v. Life Care Centers, Inc., October 21, 2014.

Why would someone in Mary’s position voluntarily sign an agreement to submit any future claims to binding arbitration? It is not clear, as there are few benefits accruing to the patient in such a situation. Benefits to the facility are much more obvious: the arbitration process is much less expensive, less likely to result in significant awards, and less prone to the strong reactions that jurors sometimes evidence.

This is not the first time Arizona courts have addressed arbitration agreements in nursing home settings. In 2013 we reported on another case, in which the Arizona Court of Appeals ruled that the arbitration agreement was unconscionable. Why was that agreement overturned, while Martha’s agreement was voided only because it was not signed for her last two admissions? Because in the 2013 case, the evidence was clear that the patient (who was still living and filing the lawsuit himself) would have to come up with over $20,000 just to initiate the arbitration proceeding.

What message does Martha’s case have for others? First, it needs to be clear that it is limited to Arizona — other states have addressed similar agreements to submit to binding arbitration, and they have been approved or rejected based on both similar and different theories. State law really does matter.

Perhaps a better question to consider, though, is what you might do when admitting a loved one to a nursing facility. Should you sign an arbitration agreement? What happens if you do not?

First, the arbitration provisions will probably be in a separate document or separately spelled out in a combined agreement (requiring your signature on that section). The arbitration provisions are likely to have language like Mary confronted, too — telling you that your signature on that section (or that separate form) is optional. Don’t sign that provision and you will not be bound by it. We think you ought to go further, in fact. Cross out the arbitration portion. Write “no” next to it. Make it clear that you didn’t just forget to sign, but that you specifically refuse the offer of binding arbitration.

Should you have a lawyer review your nursing home contract before you sign? Yes. Here’s an important benefit: it buys you time, to consider the significance and effect of your signature. Tell the facility that you’ll get the agreement back to them as quickly as you can get with your lawyer and review it.

What you really want, of course, is not to have a claim against the nursing facility at all. In other words, you want your family member’s care to be excellent, and to have no adverse outcome. To that end, keep close tabs on the care at the facility. Challenge staffing levels, care decisions, diagnoses and accommodations made by the facility. You want the caretakers (and, in fact, the facility itself) to view you as a concerned advocate, and not an angry and dissatisfied irritant — but you want to maintain your level of concern and oversight.

Good luck. It is really difficult to have a family member in the nursing facility. It is more difficult for them; help them as ably as you can.

Ever signed a loved one into the nursing home? If so, you will recall the pile of forms you were handed. One probably authorized them to take pictures of your family member and use them in promotional material. Another authorized the facility to bill Medicare directly. Another … well, you get the idea.

Buried in the main form, though, was probably a paragraph about “arbitration.” You probably were asked to separately initial that provision, and you might well have done so. And if you haven’t had this experience yet, you are likely to run into it as a parent, spouse or other family member ages and requires more nursing or medical care.

What is the effect of those arbitration provisions? Generally, they require that any dispute you later have with the facility — like allegations of inadequate care, or injuries caused by an employee’s negligence (or even willful acts) — would have to be submitted to an arbitration process as an alternative to court action. You are basically being asked to sign away your family member’s right to sue, and to collect full damages for any injury inflicted. By signing, you also give up any right to take the matter back through the court system if the arbitration mechanism does not work for you or your loved one.

Can they do that? Courts have been divided over whether mandatory arbitration agreements are even enforceable. There is a strong preference for alternative dispute resolution, and many courts have upheld arbitration agreements on that basis. But a handful — including, now, an Arizona appellate court — have found mandatory arbitration clauses unconscionable and unenforceable.

Jim Cartwright (not his real name) was 88 years old when he entered a Phoenix-area nursing home for recovery after hip surgery. He actually signed himself in, though not until he had been in the facility for three days. One provision of the admission agreement called for mandatory arbitration of any dispute he might have with the facility — though it did not require arbitration if the facility later decided it wanted to sue Jim.

During his short stay, Jim acquired a pressure ulcer on his back — severe enough to expose bone and requiring medical attention and further long-term care. He claimed that this was the result of negligent care provided by the facility, and he sued.

The nursing home pointed to the mandatory arbitration provision and asked for dismissal of the lawsuit. Jim’s only recourse, according to the facility, was to submit his claims to an arbitration panel chosen by the two parties. The arbitration ruling would be final and unappealable. It also would require Jim to pay initial arbitration costs of about $22,800 in order to even get a hearing on the subject.

The trial judge refused to dismiss Jim’s lawsuit, and the nursing home appealed. The Arizona Court of Appeals last week ruled that the facility’s arbitration agreement — signed or not — was unconscionable and could not be enforced. His lawsuit can now go forward.

There are two reasons the trial court and the Court of Appeals invalidated the arbitration provision. One was that it would effectively bar Jim from recovering anything for his injuries, since there is no way he could come up with the $22,800 it would cost to get the arbitration started. The other was because of the way the facility crafted the agreement, requiring Jim’s claims to go to arbitration but preserving access to the court system for themselves in any future dispute. Clark v. Renaissance West, LLC, July 30, 2013.

Does this mean that your arbitration provision will also be struck down if you choose to sue a nursing facility some day? Not necessarily. The complexity of Jim’s case, and the fact that three arbitrators might be required, contributed to the court’s finding. A better option is to simply not sign an arbitration provision in the first place.

How can you avoid signing an arbitration agreement if you admit yourself or a loved one to a facility? Look at the admission agreement. Find the provision about arbitration. Draw lines through it (or a big “X” across it). Do not initial where it says “initial here”. You are not required to sign away your rights in order to enter a nursing facility.